Cell C: One year, one million connections

Johannesburg, 14 Nov 2002

Cellular provider Cell C says it has made more than a million connections during one year of operations and now wants to capture up to 25% of the local cellphone market within five years.

The company, which has spent more than $300 million of its estimated $640 million required funding, claims massive advances in its retail footprint, brand awareness and market impact. However, according to figures it released yesterday, it is still dependent on the defection of customers from MTN and Vodacom.

Despite the one million connections, Cell C says it has closer to 150 000 active customers, defined as users who generated revenue for it during the last three months.

With 90% of its subscriber base made up of prepaid users, who are often substantially less profitable than long-term contract users, it is unlikely to be giving the incumbents sleepless nights. MTN has around four million South African users and Vodacom is estimated to have more than seven million customers.

Cell C says 65% of its clients were formerly connected via one of the incumbent operators, another fact that will not greatly worry the large players. With market churn estimated at more than 20%, about two million users are up for grabs at any one point. Those who move between cellular networks tend to be in the category that spends the least on airtime, and this is not a hotly contested sector.

While not disclosing the company`s average revenue per user (ARPU), CEO Talaat Laham says harvesting the churn has not left it with only the dregs.

"Our ARPUs are within the industry range for both prepaid and postpaid," he asserts.

Good marketing, bad network footprint

Cell C has the most optimistic outlook of the three cellular companies, believing that the South African market could hold 17 million potential users. But whatever the size of the market, it has set itself a stretch target of 25% of the total by end-2007 and says it is in a position to achieve that.

Jose dos Santos, who heads up the Cell C service provider operation, says 80 Cell C franchises will be operational by the end of next year, to combine with 4 000 current retail outlets to give the company significant geographical reach.

"If you take this footprint and put it next to the incumbents` the overlap is huge," he says. "We have 75% of their footprint."

Establishing a network footprint has proven more difficult, with more than 70% of Cell C traffic still carried by Vodacom, with which it has a 15-year roaming agreement.

Only 600 Cell C base stations and 120 micro-base stations are live, although 1 000 are to be constructed and ready by year-end.

"The site acquisition process is a very, very long process," says Laham. "Sometimes it takes six to 12 months."

The 1 500 base stations due to have been on air by the end of this year will now only be reached during next year. Most efforts are currently directed at establishing stations using the 1 800MHz frequency in urban areas as Cell C is to stop using Vodacom infrastructure in urban areas by November 2004.